Legislators Scramble to Save Battered Economy

by Amy Lillard

 

The housing market woes seeped into the greater economy over the last year. But in the last week, fears of a full-blown recession have caused panic and drastic action by regulators and lawmakers.

On the heels of the surprise interest rate cut earlier this week, a dramatic 0.75 percent cut to the overnight bank lending loan that affects credit card, home equity, auto and other interest rates, the White House and congressional leaders proposed an economic stimulus package. The plan is intended to act quickly and prevent further panic on Wall Street and around the globe.

Thus far it has bipartisan involvement and support, but the communal spirit is quickly deteriorating. Both parties are attempting to remain unified with President Bush, but business as usual in a gridlocked Congress is wearing down the goodwill. Lawmakers are attempting to hurry the package along, both to influence the economy as soon as possible but also to prevent the plan from falling apart.

Treasury Secretary Paulson and House Speaker Nancy Pelosi are guiding the economic package development, totaling $145 billion. The stimulus package includes:

• Tax rebates for individuals to spur consumer spending

• Business tax breaks to prompt new investment

• Extension of social welfare benefits such as unemployment aid and food stamps. This option may be exchanged for a progressive rebate plan that sends checks to all workers who make less than $75,000 a year or married couples who make less than $150,000.

Other potential components directly focusing on the housing market include:

• Expansion of the Federal Housing Administration's ability to insure higher-priced mortgages.

• Temporarily increasing the size of jumbo mortgages available from Fannie Mae and Freddie Mac, from $417,000 to as high as $729,750.

• Enhanced powers for the FHA to help homeowners threatened by foreclosure to renegotiate their loans, without sharp increases in their payments.


Even if an agreement is reached and passed by next month, taxpayers might not see their rebate checks until June. Meanwhile, Democrats and Republicans are now arguing over additional components to the package.

Washington Post Article about this subject